The #1 secret we have learned through financial debt counselling
When performing financial debt counselling, we discovered many people are confused by financial lingo. As a result people have been negatively affected financially.
As a result we started a series on confusing financial terms. We began with Balloon Payments Can Cost You More Than You Bargained For. Today we’re going to be discussing APY – Annual Percentage Yield. Interest rates play an important role in borrowing and investing. Understanding your APY can will give you a clear picture of what you owe or could maybe gain.
What is APY?
APY is the true annual rate of return taking into account the effect of compounding interest. If you have a credit card and carry a balance each month you’ll be paying interest on top of the previous principal and interest. The interest each month (in effect it’s interest on interest) calculates on a daily basis. It is an important aspect of financial debt counselling.
Why is APY important?
APY is a great tool for evaluating the true interest rate paid on a loan or the return on an investment. It takes compounding into consideration and thus is actually higher than the stated annual interest rate.
If you owe money on a credit card, your APY will almost always wind up being higher than your card’s listed APR (Annual Percentage Rate). Interest charges added to your balance for every month you fail to pay it off in full is the reason. This means that over time you’ll be paying interest not only on the principal amount you owe, but on the interest as well.
In our financial debt counselling sessions, we always expose the APY secret. We will now expose it for you. Say your credit card has a stated APR of 19.99%. If you carry a credit card balance from month to month, an APR of 19.99% compounded daily equals an APY of 22.1214%.
Are you unable to make your monthly payments? Were you not aware of APY?
The reality is that you could be paying a much higher amount than you bargained for. It also may be a much higher amount than you can afford. Most people we counsel are not aware of or didn’t understand APY. In our financial debt counselling sessions, this is everyone’s “AHA” moment.
If you’re dealing with insurmountable debt for any reason contact Ira Smith Trustee & Receiver Inc. today. We’re a full service insolvency and financial restructuring practice serving companies and individuals throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. Give us a call today.
We can help. Maybe all you need is some financial debt counselling. Perhaps you need to explore one of the many bankruptcy alternatives. Either way we can devised a plan that allows you to carry on a debt free, stress free life.
Watch for future blogs when we’ll be discussing other confusing terms that can impact you financially.
